Joint Committee on Tax Law Rewrite Bills Minutes of Evidence

Examination of Witnesses(Questions 100-114)



Dawn Primarolo

  100. If an employer transfers a debt to the employee which is about to be paid to the employer, the value of that debt is not high but when it is paid , if it is paid in the full value, its value is higher.
  (Mrs Scott) Yes.


  101. If a manufacturer of chocolate bars paid in chocolate bars, it would cost the employer much less than the employee could sell it for. You tax it on the basis of what the employee could sell it for. That is still treated separately from benefit in kind?
  (Mrs Scott) Yes.

  Lord Goodhart: The gold bars and payment in commodities was used in recent years to avoid national insurance contributions.


  102. This is outside your remit but national insurance views are not yet drafted in plain English. Is there any prospect of this moving across and getting rid of these problems whereby you can pay people with various commodities and avoid national insurance?
  (Mrs Scott) I think it has been fixed. I do not know the details.

  Dawn Primarolo: It is not quite fixed.


  103. Every time Parliament has legislated to cover some bizarre new commodity being used for payment, people have thought of another bizarre commodity which they could start paying out and which avoided national insurance. They are still playing that game of catch-up, are they?
  (Mrs Scott) They are still playing games, I understand.

  Chairman: The definition of liability for national insurance earnings for the purposes of national insurance is still drafted in quite different language to the language you are now using in income tax.

  Dawn Primarolo: Because Parliament itself holds the route for how national insurance legislation is processed. It is administered through the Inland Revenue. The parliamentary process has to be reformed itself to allow a course of alignment, so there has been alignment where possible. It is never perfect because there is always creativity in what the new mechanisms might be and complete alignment is a huge policy issue about flags in the national insurance system on entitlement. The Finance Bill cannot legislate for national insurance without a fundamental change.

Baroness Cohen of Pimlico

  104. The rules are inconsistent because you do not pay national insurance on health insurance or cars, although they are treated as benefits in kind over the year. There are artificially assigned amounts.
  (Mrs Scott) I fear that we are getting slightly outside our scope of expertise, but there are class 1A benefits under the national insurance system which apply in respect of car benefits.

  Chairman: Attempts are constantly made to get them closer to each other. My examples are not totally irrelevant. There was a brief time when people were paying the earnings of some of their senior employees in debts like gold or silver, not seeking to evade income tax, but they avoided all the national insurance liability until that was dealt with. We talk about the rewriting of the tax laws. Given that we have got rid of the Contributions Agency, a step of which I wholly approve, and given that what we are actually talking about is people's liability to make their contribution on whatever they earn, there is a case for making sure it is all drafted in the same sort of language and it can then be read across more easily.

  Lord Howe of Aberavon: We can give thanks for the fact that we are not also grappling with the details of prices and income support.

Mr Jack

  105. Can I go to an area which has been around a long time, which is people being paid in non-cash vouchers? Clause 84 of the Bill, page 42, deals with this matter. I would be interested if you could give us a commentary on the before and after effects of what you have done. How far back does the tax law dealt with by clause 84 go and, given that there have been all kinds of attempts in the past not just in the 20th but the 19th and the 18th centuries to pay people without paying them cash, how far back does the tax law go on this and how far do you go in ensuring that you replicate in today's language and terminology some of these effects of history in this part of tax law?
  (Mrs Sampson) When we did the analysis, we went back to the original drafting papers if we could not work out what was meant by the statute as it was and looked at the correspondence between the drafters and the instructor to find out what they were trying to do. We built on that to come back to something that we could put in clearer language, to break it down into the clauses we have here, compared to the very dense sections 141, 142 and 143.

  106. There were three different sections of the existing tax law which constituted what is now clause 84 of this Bill?
  (Mrs Sampson) No. The non-cash vouchers come under section 141 of ICTA. It was the analysis of all that plus drawing on some of the general rules that come within section 144 which we wrote back into here to try to make it clearer.

  107. You have alerted us to an interesting piece of methodology which you have used. Has that been in general the way that you have approached not just this particular clause but other parts of the Bill to ensure the line of purity of thought in terms of ensuring that what we see before us today is what Parliament meant in terms of the original wording of the original legislation from which this Bill has now been drawn?
  (Mrs Scott) In every provision that we rewrite, we go back to look at the notes on clauses when the provision was introduced. We will often look at drafting papers. They are not always available. If you are looking at provisions first introduced in the early part of the century, you stand precious little chance of getting hold of the drafting papers. Notes on clauses are generally available. We look at all the manuals and publications by our specialists. We look at outside commentators' views of the law and all the relevant tax cases. We bear them all in mind in weaving together the various concepts that form the clauses in this Bill. It is not necessarily true to say that we will always deliver the original parliamentary intention. If there has subsequently been a court case that establishes that the provision in ICTA does not do what government thought it did when it was being introduced, we cannot change the law to put it back to what government originally intended. That would require a Finance Bill change.

  108. If the court has changed the way people thought the law was working, are those changes now incorporated in this Bill?
  (Mrs Scott) Yes, where it is a settled court decision. When something has appeared in the High Court last month or in the early part of this year, no, but we are not aware that there are any cases where there is currently a dispute.

  109. By and large, those court cases would have affected the mechanism but not the purpose of the original legislation. Would that be right?
  (Mrs Scott) The original purpose of the legislation may well have been to give a deduction in particular circumstances and the legislation may have been drafted in such a way that the scope of the circumstances in which the deduction is available is different.

  110. Users of the old tax legislation which this replaces would have to have had the original Act together with their knowledge of the court cases and an accountant advising a client would have said, "This is what the Act says, but so and so has now changed it." You have brought this together so that people can chuck out their court cases because it is all in the Bill.
  (Mrs Scott) I would not recommend that people chuck out their court cases. There is a lot of useful dicta in court cases.

  Mr Jack: In terms of real world use, this Bill reflects court judgments which have changed tax law. In other words, it has incorporated the modifications by the courts in this Bill so that, if this Committee were to recommend to the House approval of this, we have incorporated a court change into the law.


  111. I think what you are asking is this: you have not taken the opportunity anywhere of reversing a court decision in order to draft the law in a way that overturns the decision.
  (Mrs Scott) No.

  Chairman: The only other subject we have not touched on is the drafting. We have been provided in the memorandum of evidence with some before and after examples. In my opinion, the Committee is debating drafting but it is essentially a written exercise and it is a question of the Committee having a look at the examples of before and after and then raise any comments if they are dissatisfied or wish to comment about the way in which it has been done. Can I ask whether anybody will be getting onto the drafting or whether, having studied and taken note of appendix five, we are content, this being the second Bill of its kind, that the exercise of turning it into plain English remains very valuable? There is a prospect that, this afternoon, we could turn to the government amendments. Mr Jack, what is your view on how we handle our general appraisal of rewriting in plain English?

Mr Jack

  112. You have made particular reference in our deliberations this morning to getting rid of old language and yet on appendix five I notice the word "spouse". Given that we are into the world of partners, wives and various other modern phrases to determine the arrangements between persons being together in whatever way they choose, I wondered why "spouse", which is quite an old word, survives.
  (Mrs Scott) It is in the interest of general, neutral drafting that you do not refer to "husband" or "wife". If the source legislation refers to "husband" or "wife", it would be a change beyond our remit to extend it to cohabiting couples.

  Chairman: A spouse is someone you are married to and a partner is someone that you are not necessarily married to.

  Mr Jack: You trespass into difficult waters because you use the word "married".

  Chairman: This is not the occasion for a radical reform.

  Mr Jack: I appreciate that.


  113. Can I therefore conclude by asking whether it might be possible this afternoon for the Minister and the team to produce the annotated version of the amendments which you referred to? Then we can start looking at the amendments. I apologise for having given no more opportunities for private and deliberative sessions this morning. My suggestion is let us finish the evidence and turn to the amendments and wind up with one deliberative session on the whole thing before deciding what we report back to the House. If that meets general consent, I think the Committee should now rise and, if it is physically possible to get the notes to us this afternoon or put them on the board beforehand so that people have a chance to read them, I would be very grateful, although it means somebody working through their lunch hour.
  (Mr Michael) The people who will be writing the notes are the people who have been appearing before you this morning, but perhaps we can get something by 3.30.

  Chairman: If it is possible to finish it before 4.30, in both Houses there is a letter board system so Members of the Committee can look from three o'clock onwards to see if there is something on the board. If it is not possible, we will have somewhat fuller proceedings this afternoon. If any Member of the Committee wishes to table an amendment, their last opportunity is between now and this afternoon. If none turns up, I shall take it that nobody is proposing any amendments.

Dawn Primarolo

  114. Would the officials group how they do the amendments into one set which is purely corrections and technical points and concentrate on explaining to the Committee the issue where there was an inadvertent extension? That would be helpful.
  (Mr Michael) We will do that.

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